‘Predatory pricing’ of new entrants like Reliance Jio is hurting telcos: Airtel

Airtel says the ‘predatory pricing’ by Reliance Jio is hurting the telecom industry after it (Bharti Airtel) posted a 55% drop in profit


Airtel has slashed prices and introduced offers to fend off Reliance Jio  that provides free voice calls for life and isn’t charging for data until March. Photo: Pradeep Gaur/Mint
Airtel has slashed prices and introduced offers to fend off Reliance Jio that provides free voice calls for life and isn’t charging for data until March. Photo: Pradeep Gaur/Mint

Mumbai: Bharti Airtel Ltd. said “predatory pricing” by a new entrant in India’s mobile-phone services market is hurting the industry after the country’s largest carrier posted a 55% drop in profit.

The interconnection charges which carriers pay each other are “well below cost,” Gopal Vittal, Bharti’s chief executive officer for India and South Asia, said in a statement on Tuesday. “This has led to an unprecedented year-on-year revenue decline for the industry, pressure on margins and a serious impact on the financial health of the sector,” he said.

Billionaire Sunil Bharti Mittal’s company and other carriers in India are facing an escalating price war after the country’s richest man Mukesh Ambani began commercial services in September. Bharti has slashed prices and introduced offers to fend off Ambani-controlled Reliance Jio Infocomm Ltd. that provides free voice calls for life and isn’t charging for data until March.

Also Read: Airtel shares fall on rival Reliance Jio’s freebie offer, Modi’s demonetisation move

Bharti’s profit in the quarter through December declined to Rs503 crore ($74 million), missing analyst estimates. Data average revenue per user fell 13% to Rs175 as the carrier cut rates. Revenue per subscriber from voice dropped 10%. A government ban on some banknotes “aggravated the impact” on earnings in the quarter, the company said.

Prime Minister Narendra Modi in November withdrew old high-denomination banknotes that resulted in a cash crunch in the country. About 94% of Bharti’s customers in India use prepaid phone connections and may have found it harder to recharge their phones.

Also Read: Reliance Jio impact: Airtel’s Q3 results are bad enough, but Idea’s could be much worse

Shares of Bharti fell 1% to Rs316.50 at the close in Mumbai, before the earnings announcement. The stock has gained 3.6% since the start of this year, compared with a 2.8% gain in the benchmark S&P BSE Sensex Index.

Bharti had 265.9 million customers in India as on 31 December, up 9.3% from a year earlier. Bloomberg

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